Monday, May 10, 2021
Pay back government money quickly
Lufthansa is looking for three billion fresh capital
Lufthansa wants to get rid of the state participation as soon as possible. Insiders reveal that the German flagship airline wants to raise three billion euros through a capital increase. A large part of this is intended to accelerate the repayment of the aid.
According to insiders, Lufthansa, which was hard hit by the corona crisis, wants to raise at least three billion euros through a capital increase. New shares in this volume could be issued in the summer or early autumn, explained three people familiar with the process. The time and the exact amount depend on the market development. The MDax group prefer a large instead of several small capital increases, it said. Deutsche Bank and Bank of America demonstrated to Lufthansa institutional investors to what extent they would be willing to participate in the capital increase. A Lufthansa spokesman did not want to comment on this.
Last week, Lufthansa shareholders approved a framework for the issue of new shares with a volume of up to 5.5 billion euros. The airline had stated that the capital increase would not be that high. The 5.5 billion euros are just a technical figure that corresponds to the volume of the silent participations made by Germany. Overall, the Federal Economic Stabilization Fund saved the airline group from bankruptcy with 6.8 billion euros. A further two billion euros flowed from Austria, Belgium and Switzerland.
The sooner the state is out, the better
A loan of over a billion from the German rescue package has already been repaid. The state’s 20 percent stake in Lufthansa, which made the state the largest shareholder last year, cost around 300 million euros. One billion euros was drawn from the silent participations in 2020, which will probably only be repaid in 2023 when the state aid is withdrawn. Lufthansa is considering drawing another 1.5 billion euros from the state in the current quarter. This sum could then be repaid with the funds from the capital increase, the remainder could improve the equity ratio of only 3.5 percent at the end of 2020.
Lufthansa wants to repay the state funds as soon as possible. Because these are linked to requirements of the EU Commission such as the elimination of manager bonuses or a takeover ban. The earlier the state’s exit comes, the better it is, said a government representative.
Aviation in Europe is only slowly recovering from the corona shock in view of the arduous fight against the pandemic. The progress in vaccination raises hope that people will be able to travel more again in the summer. The Lufthansa Group recently cut the forecast for its offer for the year as a whole to 40 percent of the pre-crisis level, as bookings in the spring remained weak due to the third wave of corona infections.
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